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Business Transactions and Their Analysis

The document discusses the accounting cycle which includes identifying transactions, journalizing, posting transactions, preparing financial statements, and closing books. It also defines source documents, different types of events, formats for journal entries, and provides an example to journalize transactions through drills.

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Amie Jane Miranda
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478 views12 pages

Business Transactions and Their Analysis

The document discusses the accounting cycle which includes identifying transactions, journalizing, posting transactions, preparing financial statements, and closing books. It also defines source documents, different types of events, formats for journal entries, and provides an example to journalize transactions through drills.

Uploaded by

Amie Jane Miranda
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Business Transactions and their

Analysis
Coverage of Discussion:
•Accounting Cycle
•Steps in Accouting Cycle
•Types of Events
•Journalizing
•Drills!
The Accounting Cycle
• Represents the steps or procedures used to
record transactions and prepared financial
statements.
• The accounting cycle implements the accounting
processes of identifying, recording and
communicating economic information.
Steps in the Accounting Cycle
• Identifying and analyzing business documents or
transactions
• Journalizing
• Posting Discussion
• Preparing the Unadjusted Trial Balance
• Preparing the adjusting entries
• Preparing the adjusted trial balance (or worksheet
preparation)
• Preparing the financial statements
• Closing the books
• Preparing the post-closing trial balance
• Recording of reversing entries
Identifying and analyzing transactions and
events
• It involves identifying a business transaction and
analyzing whether or not that transaction affects
the assets, liabilities, equity, income or
expenses of the business.
▫ Accountable events – needs to be recorded in the books
▫ Non-accountable events – not recorded
• Transactions are normally identified from
“source documents”
▫ Written evidence containing information about
transactions.
Illustration for Source Documents
• Sales invoice VS Official receipt

Rendering of
Sales of Goods
Services
Purchase order – used Delivery Receipt –
by the buyer to indicate document signed by the
the types, quantities and receiver of a shipment
agreed prices for products acknowledging the
or services. receipts of goods.
Bank Statement – report issued
Bank Deposit Slip – evidences a
by the bank that shows the deposits
deposit to a bank account.
and withdrawals during the period
and the cumulative balance of the
depositor’s bank account.
Check – an instrumnent
that orders a bank to pay
the person named on the
check or the bearer thereof
for a definite amount of
money from the drawer’s
bank account.

Statement of Account –
is a report a business send
to its customers listing the
transactions with the
customers during the perid.
Types of Events:
• External Events – transactions that involves the
business and another external entity.
• Internal Events – events that do not involve an
external party.
Journalizing
• After an accountable event is identified and analyzed,
the second step is to record it in the journal by means
of a journal entry. This recording process is called
journalizing.
Date Account Title to be debited P xx
Account title to be credited P xx
short desccription of the transaction

• Date – chronological order


• Account titles and amounts to be debited and credited – each
transaction is recorded in the journal in two parts – debit and credit
• Short description of the transaction – short description of the
transaction for future reference.
Formats of Journal Entry
• Simple Journal Entry – one that contains a
single debit and a single cerdit element.
• Compound Journal Entry – one that contains
two or more debits or credits
DRILLS!!!
• A business had the following transactions during the month of October 20x1.

Oct. 1 The owner contributed P 800,000 cash to the business


Oct. 3 The business purchased inventory worth P 100,000 on cash basis
Oct. 4 The business purchased inventory worth P 400,000 on account
Oct. 8 The business sold goods for P 300,000 cash. The cost of the goods
sold is P 120,000
Oct. 12 The business sold goods for 700,000, on account. The cost of
goods sold is 280,000.
Oct. 15 The business paid P 400,000 accounts payable
Oct. 17 The business collected P 700,000 accounts receivable
Oct. 18 The business purchased equipment worth P280,000 for cash
Oct. 22 The owner withdrew P20,000 from the business
Oct. 31 The businesspaid salaries expense of P 50,000.

• Provide the journal entries to record the transactions and the effect on the accouting equation.

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